Why Invest

Three good reasons to make a 403(b) plan part of your retirement strategy.

If you work in education, you’re busy all the time. And you might think you’re too busy for retirement planning. But a little time spent now can significantly change your life when you retire. Here’s why.

Your pension may not be enough.
If you work in education, there’s a good chance your school has a pension plan. And if you’re like a lot of people, you think that having a pension means a comfortable retirement. Unfortunately, that may not be the case. What economists call “inflation,” ordinary people call “prices going up.” Remember what a movie ticket cost when you were a kid? Compare that to a movie ticket today. Now, imagine the price of a movie ticket by the time you retire. Yikes! You need to save more now because things will cost more when you retire.

A little money now becomes a lot of money later.
Let’s use an example. Clarice is a new teacher. She’s 25 and just getting started with her district. She is earning $30,000 annually. If Clarice contributes 10% of her salary over the course of her career, she’ll end up paying in about $185,000. That’s a tidy sum, but it gets better. Actually, MUCH better. If Clarice’s retirement savings grow tax-free with a 6% return, she’ll have more than $630,000 when she retires at 65. That’s a massive difference. If you want to run your own numbers, use this calculator from AIG Retirement Services.

You can keep more of your money instead of giving it to the IRS.
Back to our friend Clarice. Every dollar that she contributes to her 403(b) lowers the amount of her income subject to tax. So not only is Clarice saving for her retirement tomorrow, she’s lowering her tax obligation today. For Clarice, that’s a great lesson to learn.